Typically, this is where a new customer contacts the company to order goods or services. The customer is often based abroad, and payment will usually take the form of a cheque or draft which is paid in to the company bank account.
Following payment, the customer phones or emails to reduce or cancel the order, or to advise that an error has been made, e.g. purchase prices has been added to the shipping cost, and requests an urgent refund.
The company, who are keen to build a strong relationship with a new customer, processes the refund quickly, and returns it using an electronic payment facility.
In due course, the original cheque or draft is returned unpaid because it is fraudulent. The company who has refunded the amount ‘overpaid’ is therefore left out of pocket.
• Always make sure you know that any funds paid into your account are irrevocable before making a refund. More information about the Clearing Cycle.
• Always exercise caution when forming new relationships with potential customers, especially if these customers are based abroad.
• Never feel pressured into making a refund or transaction.
• Never be afraid to refer to your colleagues if you feel that something just isn’t right about a instruction or payment.
When making any payment, always consider any financial risk to your business.
• Of a new customer and/or an unusually large order
• If a customer will only provide an email address for contact purposes
• When the method of payment differs from what was previously discussed (for example, if payment is made by cheque when an electronic transfer had been expected)
• If the buyer makes a payment above the asking price, regardless of the reason given, and demands that the overpayment is returned electronically
• Of being are put under pressure to release goods/funds without undertaking essential checks
• Businesses should always ensure that a credit to its account cannot be returned before any goods or funds are released.
The information presented here is not exhaustive.
The following organisations also publish helpful financial crime advice: